The chipmaker reported an in-line third quarter but revenue and EPS guidance for the fourth quarter disappointed analysts as sales took a hit from the dwindling lack of interest in 4G handsets. Investors were disappointed too, with the stock off 3% on Thursday.

The Analysts

Morgan Stanley’s James Faucette kept an Overweight rating on Qualcomm, but lowered the target price from $95 to $89.

UBS Securities analyst Timothy Arcuri lowered the price target from $80 to $73 while remaining Neutral on the stock.

Bank of America's Tal Liani reiterated a Buy rating but lowered the price target from $105 to $100.

FTC And Huawei

Faucette noted investors have been spooked about Qualcomm’s recent loss in a Federal Trade Commission case that could have big repercussions for its licensing and royalty agreements. But management said Wednesday royalty agreements remain valid and enforceable and that Qualcomm remains confident it will succeed on appeal. Faucette also likes that Qualcomm said it will meet with analysts in November, believing that more communication with investors will boost sentiment.

But on the negative side, Faucette pointed to trouble in China with competitor Huawei, which is no longer paying royalties, and whose ability to gain share at the expense of Qualcomm customers was greater than Morgan Stanley had expected.

Handset Demand Off

The big problem, though, continues to be weaker market demand for the current generation cell phones. Qualcomm CEO Steve Mollenkopf asserted that a big part of the sales issue is the end of the 4G cycle. With new 5G devices on the horizon, who wants to buy 4G?

Liani agreed.

“We view the demand weakness as a near-term issue ahead of a global 5G cycle,” Liani wrote in a note. But Qualcomm has 5G upside coming.

“We believe Qualcomm's bull case is unchanged, with global 5G roll outs expected to increase both royalty income and demand for semiconductors beginning in 2020,” Liani said. “Press reports suggest that all of Apple's 2020 iPhones will contain Qualcomm's 5G chipset, which could drive a 5G cycle across the entire industry.”

Arcuri also thinks the future looks brighter for the stock, given that, as he wrote, “all 5G roads lead through QCOM,” adding that the coming switch over is “a massive investment theme for which there are few stocks as well positioned as this one.”